EC120 Lecture Notes - Lecture 13: Production Function, Marginal Product, Marginal Cost
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Industrial organization: the stud(cid:455) of ho(cid:449) fi(cid:396)(cid:373)s" de(cid:272)isio(cid:374)s (cid:396)ega(cid:396)di(cid:374)g p(cid:396)i(cid:272)es a(cid:374)d quantities depend on the market conditions they face the town where you live may have several pizzerias but only one cable television company. The field of industrial organization addresses exactly this question. Hele, the o(cid:449)(cid:374)e(cid:396) of hu(cid:374)g(cid:396)(cid:455) hele(cid:374)"s cookie factory buys flour, sugar, chocolate chips, and other cookie ingredients. She also buys the mixers and ovens and hires workers to run this equipment. Then she sells the resulting cookies to consumers. Total revenue: the amount a firm receives for the sale of its output. Total cost: the market value of the inputs a firm uses in total production. The cost of something is what you give up to get it. Recall that the opportunity cost of an item refers to all those things that must be forgone to acquire that item.
